"Funded account", "allocated capital", "up to X in capital": these phrases describe a commercial status. On their own, they do not say whether the trader handles real money in a market or a simulation balance. The answer is in the firm's terms, when it is there at all.
Two kinds of account
- Simulated account (demo). Orders are placed in a simulation environment. The balance is a figure managed by the firm; orders are not necessarily executed on a real market.
- Live account. Orders are sent to an intermediary or to a market, with real capital behind them. The next question is then: who owns that capital, and who holds the account?
A firm may also use a simulated account for the evaluation and another type of account after it. The terms state, or do not state, what changes when moving to funded status. The word "live" itself may cover different realities depending on the firm: do not take it as a definition, look for the description of how it works.
What the firm actually funds
There is no general answer: it depends on each firm's terms. What can be checked, for a given firm, is what it writes:
- Do the terms mention a simulated account, a demo, or "simulation"?
- Do they state that the trader holds no brokerage account in their own name?
- Do they say how orders are executed (real market, a firm-specific environment)?
- Do they describe where the money for payouts comes from?
A missing answer to these questions is not proof of one choice or the other. It is a reason to ask support in writing and to keep the reply.
Consequences for the trader
On the result. On a simulated account, the displayed profit is a number in the platform. It becomes income if, and only if, the firm pays it according to its terms. The payout therefore depends on the firm and its rules, not only on the market. See prop firm risks.
On execution. Prices, execution delays and slippage in a simulated environment can differ from those of a real market. A result obtained in simulation does not carry over mechanically to live: the difference depends on the instrument, the size and the method.
On rights. The trader does not necessarily hold a brokerage account in their name. What the firm owes, and on which conditions, is defined by its terms and conditions. This guide assumes no jurisdiction: if a legal point matters to you, consult a qualified source.
On dependence. Counterparty risk exists in both cases: the trader depends on the firm to apply its rules and to pay.
On rules. A live account may be subject to different rules than a simulated one (maximum size, instruments, hours, prohibited strategies). The rules of the evaluation phase do not necessarily carry over unchanged.
Simulated does not mean fake
A simulated account is not fraudulent by nature: many trading tools use simulation, and a firm can describe its model honestly. The problem is not simulation; it is the gap between what the trader believes is funded and what the firm actually funds. Conversely, a live account does not guarantee a payment: the trader remains subject to the firm's rules and decisions. Transparency of the terms is the criterion.
Where to look in the terms
Search for the words "demo", "simulation", "simulated", "environment", "broker", "execution", "ownership" and "assets". Also read the section on payouts: it sometimes states where the sums paid come from. Copy the exact sentences, with the date you read them, rather than summarizing them from memory.
Questions to ask before paying
- Is the evaluation account simulated or live? The funded account?
- Are orders executed on a real market, or in an environment specific to the firm?
- Who holds the account: the trader, the firm, an intermediary?
- Where does the money paid out come from?
- What happens to unwithdrawn profits if the firm stops operating?
If an answer is "not stated", record it as such in your comparison instead of filling the gap with an assumption. Write down the answers with their date. They feed into the selection checklist, which covers transparency of terms. For the general mechanism, see how a prop firm works. Terms are defined in the glossary; the general framework is in the risk warning.
The proproaster editorial team